Raising Capital At Seed – 5 Ways to De-Risk Your Round

Customer Traction

Customer traction is essential for demonstrating value to investors. Chris Saad explains that traction is best measured by active users rather than vanity metrics like website hits or media mentions 1. Yaniv Bernstein adds that traction must be real, valid, and defensible to be meaningful 2.

   

Scalable Value

Traction should indicate the potential for scalable value. Chris and Yaniv discuss the importance of showing early signals of a hockey stick growth curve 3. This credible evidence helps reduce investor risk and demonstrates the startup's potential for significant growth.

   

Market Validation

Market validation complements traction by providing unique insights into the market. Yaniv highlights that while market validation alone is not enough, it can bolster traction and tell a fuller story 4. Chris emphasizes the importance of asking for a credible amount of money to maintain investor confidence 5.

   

Intellectual Property

Intellectual property (IP) can de-risk a startup, but its value varies. Yaniv and Chris discuss that while IP is crucial in hard tech, it is often overemphasized in other domains 6. They caution against wasting resources on patents that do not provide a real competitive advantage 7.

   

Sales Pipeline

A robust sales pipeline can significantly de-risk a startup. Chris explains that interest from potential customers, especially through signed contracts or deployments, is a strong signal 8. Yaniv notes that while early pipeline signals are useful, they must be validated to be truly valuable 9.

   

Revenue Signals

Revenue at the seed stage can be misleading. Chris and Yaniv argue that while revenue is a strong signal, it can distract from developing a scalable product 10. They stress that revenue should be viewed as a signal of traction, not just money 11.